A Guide to Winning the Mobile Banking Arms Race

How to build an infrastructure that supports continuous innovation and helps differentiate in mobile.

The rapid pace of change occurring in the financial services market largely driven by growing consumer adoption of mobile is permanently altering the retail banking landscape. More and more, offering basic mobile banking capabilities is perceived by consumers as mere table stakes when it comes to evaluating their banking relationship. Differentiation in the mobile channel is critical for financial institutions (FIs) to attract and retain customers and to reap the resulting revenue benefits. To achieve this, new features must be continually introduced, and at a frequent cadence to keep up with consumer expectations.

Lisa Stanton, President of Americas, Monitise.

With a mobile-optimized innovation platform in place, FIs can be well-positioned to develop a roadmap for growth and to leverage revenue-generating opportunities in mobile payments and commerce. Moreover, FIs can extend the benefits of mobile to the entire enterprise, better serve existing customers, attract new customers, and compete with the largest banks to tap into the massive potential — and money — in people’s pockets. Mobile innovation will determine FIs’ success in the future.

The Mobile Arms Race

As evidenced by the frequent tempo of press releases announcing their new mobile features, large, national FIs clearly recognized the importance of mobile, have invested in it aggressively and are now experiencing market share increases from customer switching. Mobile has essentially turned market share gains into a zero-sum game, with larger FIs taking customers from smaller FIs due to their superior mobile offerings.

The recent success of mobile features such as remote deposit capture, person-to-person payments and bill pay – along with the projected demand in the next 12 to 18 months for mobile shopping, coupons, vouchers and targeted marketing – underscore the importance of a mobile innovation roadmap.

According to AlixPartners, 39 percent of consumers say that having a mobile offering is either “extremely important” or “important” in their decision to switch primary institutions. Additionally, when comparing the set of features for choosing a new FI between consumers who currently use mobile banking and those who do not, mobile plays a key role in mobile banking users’ FI selection decision. Finally, J.D. Power found that branch convenience is a key factor in customers switching primary FIs; mobile essentially puts the branch directly in the consumers’ pocket – the ultimate convenience.

Consumers’ expectations, and the flurry of mobile banking innovation coming from large, national FIs, are driving a mobile arms race. The lesson is simple: Act now, or customers will seek innovation elsewhere. To compete, FIs need a platform that allows them to keep parity with the largest, deep-pocketed banks by quickly deploying the features that consumers demand.

The Need for a Mobile Optimized Innovation Platform

The considerable challenge faced by many FIs – particularly those with mobile solutions from their core providers – is that their mobile platforms are not designed to compete with those of larger, national FIs. Many of their mobile platforms are tied to online banking (OLB), which inherently limits adoption; OLB-tied mobile platforms are also not purpose-built for mobile expansion, as they are designed simply to view into an FI’s enterprise data system in order to obtain and display information. Many are also hampered by a lack of rapid feature innovation; 12-18 month product release cycles are insufficient to deliver the new mobile features that consumers want and expect.

In order for an FI to compete in the mobile arms race, its mobile platform should have a modular architecture which will allow the FI to add new products and services to its mobile offering without requiring a costly, time-consuming software upgrade, thereby accelerating time-to-market and reducing friction. A next-generation mobile platform will empower an FI to move at the speed of mobile.

Uncover New Revenue Opportunities Beyond Mobile Banking

A mobile-optimized innovation platform will also enable FIs to capitalize on new revenue-generating opportunities in mobile payments and commerce. Bank of America’s BankAmeriDeals program and U.S. Bank’s mobile shopping app that links ads in print, TV or radio directly to the product advertised on a company website are good examples of how FIs can increase customer engagement by delivering value to customers and merchants in new ways. Merchants, after all, are the next logical non-traditional source of revenue.

And mobile is driving revenue opportunities through other bank channels as well, such as RBS’ cardless ATM withdrawal Get Cash service.

Mobile presents a huge opportunity for banks to better engage with existing customers, to win new customers and to increase revenue through mobile payments and mobile commerce capabilities. The mobile arms race can be won, but only with a mobile optimized innovation platform in place. FIs must seize the mobile opportunity today to prepare for the future — or be left behind entirely.

Very telling that in the span of only 2-3 years, mist people went from being wary of mobiles banking -- mainly due to security reasons, to nearly 40 percent saying mobile is an important factor in choosing a bank.